The Latte Levy
Most disposable cups have a plastic lining which are harder to breakdown, with the majority of these cups ending up in landfill sites due to the UK’s lack of ‘binfrastructure’.
Businesses may therefore choose to impose their own ‘latte levy’ on every disposable cup sold to help reduce waste and support local councils in providing food packaging recycling bins and waste management.
Essentially there would be a charge on every disposable cup purchased, likely to be 5p - 25p.
Accounting for the latte levy
The amount charged to customers should be tax inclusive at the standard rate of VAT.
For example, when a VAT registered supplier charges an extra 25p, the taxable amount will be 20.84p and the VAT amount will be 4.16p.
The 20.84p receipt will be included as income when calculating trading profits.
‘Reasonable costs’ can be claimed as follows:
- Seeking expert advice regarding the charge
- Communicating the new policy to customers and any staff training in this respect
- Changes required to till systems
- Administering the net proceeds/donations to a good cause
What should you do with the proceeds generated from the levy?
The net proceeds generated from the charge are calculated as the total proceeds received, less any reasonable costs incurred by the business.
As it is not currently a compulsory levy there is no stipulation to ring fence the proceeds. However it is likely that these will be donated to good causes, particularly environmental causes or invested specifically to help improve the UK’s recycling and reprocessing facilities.
Subscribe to
Inspired
Our monthly bulletin INSPIRED is packed with useful articles to keep you up to date with news and legislation that may affect you or your business.
Recent news stories
Armstrong Watson can help
Whether you need expert accounting, strategic business advisory, tax planning, or financial guidance, our experienced team is here to support your success. From sole traders to large enterprises, we provide tailored solutions to help you navigate complex financial challenges and achieve your goals. Get in touch today to discover how we can help your business thrive – call 0808 144 5575.